LABOR PRICING GUIDE
How should I price labor in my small business?
Short answer: do not base a customer labor rate on wage alone. Your selling rate has to account for the worker's true employment cost, the hours you cannot bill, business overhead and the contribution the company needs to retain.
Start with loaded labor cost
An employee who earns $25 per hour may cost the business more after payroll taxes, workers' compensation, benefits, paid time and other employment expenses.
Separate cost from selling price
Loaded labor cost tells you what the worker costs. It does not automatically tell you what the customer should be charged.
Labor selling target = loaded labor cost + overhead recovery + required profit contribution
Account for nonbillable employee time
Meetings, travel, cleanup, training, shop time and gaps in scheduling can reduce the percentage of paid hours that produce billable revenue.
Track actual job hours
If jobs routinely take longer than estimated, even a mathematically sound hourly target can fail. Compare estimated labor time with actual labor time and update future pricing.
Use your own numbers
JJL Business Tools turns these ideas into practical targets using your actual costs, time and income goals.
See the Labor Rate Guide